UPDATE: HSBC Downgrades Cognizant Technology Solutions (CTSH) to Hold
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HSBC analyst Yogesh Aggarwal downgraded Cognizant Technology Solutions (NASDAQ: CTSH) from Buy to Hold with a price target of $79.00 (from $90.00).
The analyst comments "CTSH performance continues to lag its peers and the recent growth guidance cut was quite surprising as well. As the sector slows in the coming quarters, CTSH may show less underperformance relative to peers, but many parts of the business need structural repair, especially banking. As shown in exhibit 1, Cognizant grew c8ppt less than the peer group last year, which is likely to shrink to c5% in FY23/2022. This gap may shrink further in FY24/2023. A big chunk of this sluggishness in our view is driven by CTSH’s relatively weak position in the BFSI space. In our view, CTSH’s presence in large US banks has been undermined in recent years. Even in the Tier 2 banks, which was CTSH’s core strength, the company has struggled to leverage the growing digital spend. This relative weakness in the BFSI digital portfolio is probably also leading to lower profitability. This is not an issue which can be fixed in a hurry – it will need continuous investment and market push by the company."
Shares of Cognizant Technology Solutions closed at $69.94 yesterday.
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